Where Buyers’ Housing Budgets Are Stretched the Most, Least

September 11, 2020

To help buyers avoid becoming “house poor,” many financial experts advise them not to pay more than three times their annual income for a home. But that guideline isn’t easy to follow in some high-priced markets. Further, buyers are grappling with higher home prices and steep competition that may require them to stretch their budgets more.

In California, buyers are the most likely to face this quandary, according to a new study from LendingTree. Five of the 10 cities where buyers are leveraged the most in real estate are in California. Even Californians earning six-figure salaries may need to borrow more than three times their annual income to be able to afford a home, LendingTree reports.

LendingTree researchers analyzed how much leverage buyers have in the nation’s 50 largest metro areas by comparing how much money is borrowed to a person’s income. The following cities are where people are taking out the largest home loans relative to their incomes:

1. San Diego

  • Leverage ratio: 3.79
  • Median mortgage amount: $485,000
  • Median borrower income: $128,000

2. Los Angeles

  • Leverage ratio: 3.66
  • Median mortgage amount: $505,000
  • Median borrower income: $138,000

3. Salt Lake City

  • Leverage ratio: 3.61
  • Median mortgage amount: $285,000
  • Median borrower income: $79,000

4. Denver

  • Leverage ratio: 3.51
  • Median mortgage amount: $355,000
  • Median borrower income: $101,000

5. San Jose, Calif.

  • Leverage ratio: 3.45
  • Median mortgage amount: $725,000
  • Median borrower income: $210,000

Meanwhile, these are the cities where buyers are taking the smallest loans relative to their income:

1. Pittsburgh

  • Leverage ratio: 2.09
  • Median mortgage amount: $165,000
  • Median borrower income: $79,000

2. Buffalo, N.Y.

  • Leverage ratio: 2.10
  • Median mortgage amount: $145,000
  • Median borrower income: $69,000

3. Cleveland

  • Leverage ratio: 2.15
  • Median mortgage amount: $155,000
  • Median borrower income: $72,000

4. Oklahoma City

  • Leverage ratio: 2.26
  • Median mortgage amount: $165,000
  • Median borrower income: $73,000

5. Cincinnati (Tie)

  • Leverage ratio: 2.33
  • Median mortgage amount: $175,000
  • Median borrower income: $75,000

5. St. Louis (Tie)

  • Leverage ratio: 2.33
  • Median mortgage amount: $175,000
  • Median borrower income: $75,000